Chapters 5-8 Flashcards
A Policy that allows changes or adjustments to the policy face amount, the amount of premium, the period of protection, and the type of coverage (term or whole life)
Adjustable Life Insurance
A type of term insurance that provides coverage for one year, then automatically renews at the end of the policy year for another year without evidence of insurability.
Annually Renewable Term (ART)
The insurance company’s account for investing policyholder premiums in safe and conservative investments.
General Account
Life products that allow the policyowner to assume the premium the premium investment risk with the possibility of greater cash values and a chance to keep peace with inflation
Variable Contracts
A type of permanent life insurance that guarantees coverage for life and minimum death benefit, but no guarantee to the cash value. The death benefit and cash value will fluctuate according to the performance of the separate accounts
Variable Life Insurance
A flexible premium life policy that combines aspects of both variable life and universal life insurance
Variable Universal Life Insurance
A type of term insurance the provides coverage for one year, then automatically renews at the end of the policy year without evidence of insuribility
Annually Renewable Term (ART)
A term life policy that may be exchanged to a permanent life policy without evidence of insurability
Convertible Term
A type of permanent life insurance that provides for a death benefit, if the insured died during the term or pays the proceeds at the end of the term as a living benefit
Endowment Policy
A type of term life insurance in which the death benefit increases over the policy’s term.
Increasing Term Insurance
A type of whole life insurance whose premiums vary based upon the insurer’s investment experience, mortality risk, and expense assumptions
Interest Sensitive Whole Life
An insurance contract covering two or more lives that pays policy proceeds upon the death of the first insured. Then the policy is terminated.
Joint Life Policy
A type of term life insurance in which the death benefit remains constant over the policy’s term.
Level Term Insurance
A policy that will pay a stated amount to a beneficiary upon death of the insured.
Life Insurance
A form of whole life insurance in which premiums are paid for a specified number or years or to a specified age of the insured
Limited pay life
A federal tax law that limits high amounts of premium into a cash value insurance policy. If the policy is paid up within the first 7 years, distributions of cash value will most likely be subject to tac and penalties.
Modified Endowment Contract (MEC)
A term life policy that may be renewed for the same specified number of years without evidence of insuribility
Renewable Term
To give up a permanent life insurance policy
Surrender
An insurance contract that provides protection only for a stated number of years. If the insured dies within that period of time, a beneficiary with receive the proceeds. If the Insured is alive at the end of that period of time, the policy has no value.
Term Life Insurance
A Period of time after the due date of a premium where the policy remains in force.
Grace Period
A provision that gives the policyholder the right to review the policy for a stated number of days, usually 10, and receive a full refund if the policy is returned to the insurance company,
Free Look
A provision in a life insurance policy that states if the insured commits suicide within the first two years (Illinois insurance law) of the effective date, the policy is void. The company will usually return premiums to the
beneficiary.
Suicide Clause
A stipulation that authorizes the insurance company to pay any defaulted premium from the cash value of a life policy. The insurance company will treat this as a policy loan.
Automatic Premium Loan Provision
A limitation or exclusion of coverage for private aircraft. Fare-paying passengers and commercial crewmembers do not have this exclusion in
their life policies.
Aviation Clause
A period of time, usually after the first two years the policy has been in force, in which the insurance company cannot deny a claim or void the
policy based on misstatements or omissions on the application.
Incontestable Clause
The part of the insurance contract that sets forth the amount, renewal, and frequency of premium payments
Consideration Clause
A policy owned by someone other than the insured
Third Party Ownership
A model law that states if the insured and sole beneficiary die at the same time (that is, it cannot be determined which person lived longer), it is presumed that the insured outlived the beneficiary. Also known as common disaster provision.
Uniform Death Simultaneous Death Act
A policy condition designed to protect the contingent beneficiary or provide an alternative beneficiary in the event that both the insured and primary beneficiary die as a result of a common accident.
Common Disaster Provision
A condition that states if the insured misstated (intentionally or unintentionally) age or gender, the insurance company will adjust the benefit payable to what the premiums paid should have been purchased
or based on.
Misstatement of Age or Gender Provision
A limit to the period of time that the company can deny a claim after the policy has been in force for a set number of years, usually two years.
Time Limit on Certain Defenses
A life insurance rider that allows for the early payment of some portion of the policy’s face amount, should the insured suffer from a terminal
illness or injury
Accelerated Benefits Rider/Option
A written sales agreement between a viatical settlement provider and a terminally ill policyowner/insured. The policyowner sells the policy for an amount less than the death benefit, but more than the cash value, to the viatical settlement provider who becomes the owner and irrevocable beneficiary.
Viatical Settlement
Privileges to protect the cash value of a lapsed permanent life policy
Nonforfeiture Options
Benefits accorded by law, so that the policyowner will not forfeit cash value.
Nonforfeiture Values
A policy that does not allow the policyholder to share in the company’s divisible surplus
Nonparticipating
A policy that allows the policyholder to share in the company’s divisible surplus
Participating
Various methods by which the beneficiary of a life insurance policy can receive the policy proceeds usually determined by the policyowner.
Settlement Options
The insurance company must allow the policyowner to borrow money using the policy’s cash value as collateral to secure the loan. This is one
of the nonforfeiture options.
Policy Loan
A dividend option that purchases additional life insurance with the policy
dividends at the insured’s attained age.
Paid-Up Additions
Calculated by an actuary using two factors – (1) risk minus (2)
investment income. Loading is not a factor.
Net Premium
A nonforfeiture option that allows the policyowner to receive the cash value when surrendering or giving up their permanent life insurance.
Cash Surrender Option
The amount of equity (cash value) available, if the policyowner surrenders their permanent life insurance.
Cash Surrender Value
A dividend option that leaves the policy dividends with the insurance company to invest and earn interest.
Accumulation at Interest
A nonforfeiture option that allows the policyowner to use the cash values of a lapsed permanent policy, as a net premium, to purchase another whole life policy with a reduced face amount, but permanent protection.
Reduced Paid-Up Insurance
A nonforfeiture option that allows the policyowner to use the cash values of a lapsed permanent policy, as a net premium, to purchase term
insurance with the same amount of protection as the lapsed policy offered.
Extended Term Insurance
Payment of the entire amount of proceeds from an insurance policy as opposed to a settlement option which pays the proceeds over time.
Lump Sum
A life insurance settlement option that pays the interest on policy proceeds (as opposed to a lump sum settlement) being invested by the insurance company. The death benefit will be paid out at some later
specified date.
Interest-Only Settlement
A life insurance settlement option that pays the policy proceeds in periodic installments for a stated number of payments (as opposed to a lump sum settlement).
Fixed Period/Time Settlement
A life insurance settlement option that pays the policy proceeds in periodic installments of a fixed dollar amount (as opposed to a lump sum settlement)
Fixed Amount Settlement
A life insurance settlement option that uses the policy proceeds to purchase an immediate annuity for the beneficiary
Life Income Settlement
A rider or provision whereby the insurer gives up the right to receive premium, yet keeps the policy in force after the insured has been totally disabled for a specified period of time.
Waiver of Premium
An attachment to a juvenile policy that waives future premiums, if the policyowner dies or becomes disabled until the juvenile reaches the age of majority.
Payor Rider
An option or rider that allows the policyowner to purchase additional coverage without evidence of insurability
Guaranteed Insurability
A term rider that covers a family member other than the insured and is attached to the insured’s “base” policy
Other Insureds
